Barclays stoops to a new low

by Ed Bowsher on 18 February 2011  |  14 comments
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Barclays was fined £7.7 million last month for giving poor investment advice to some customers. In spite of this poor track record, Barclays is arguing that new rules on financial advice shouldn't apply to the bank.

Barclays was fined £7.7 million last month for giving poor investment advice to some customers. In spite of this poor track record, Barclays is arguing that new rules on financial advice shouldn’t apply to the bank.

Last month the FSA fined Barclays £7.7 million for giving poor investment advice.  The bank had advised more than 12,000 customers to buy units in two investment funds that have since performed poorly.  Barclays was fined because its staff didn’t properly explain the risks involved when the units were bought. The bank also didn’t take sufficient care when considering whether the funds were appropriate investments for the customers.

Since then, Barclays has announced that it’s no longer going to offer financial advice in its high street branches. That’s welcome news, so why am I saying that the bank has stooped to a new low?

Well, Barclays is still planning to offer advice to affluent people – known as ‘High Net Worth’ individuals – through its Barclays Wealth division. Again, that’s not in itself a terrible thing. It’s at least possible that a separate division aimed at rich folk might offer better advice than branch-based sales staff.

My beef with Barclays is that it’s arguing that new regulations on financial advice shouldn’t apply to its Barclays Wealth business. The new regulations are called the Retail Distribution Review (RDR). For those who don’t know, the RDR will force financial advisers to sit more exams and the advisers will also be obliged to generate income by charging fees rather than rely on commission.

Given Barclays’ recent track record, I find it extraordinary that Barclays is taking this stance. Surely rich folk deserve to receive advice from well-qualified staff as much as poorer people do?

No doubt, Barclays believes that High Net Worth individuals are savvy enough to pick a good adviser and don’t need protection from the regulator. But I think that’s rubbish. There are plenty of rich people who know little about money. They deserve, and need, protection from the regulator.

Barclays should reconsider.